A product is defined as anything that can be
offered to a market to satisfy a want or need, including physical goods,
services, experiences, events, persons, places, properties, organizations,
information, and ideas. Five product
levels need to be addressed by marketers in planning their market
offering. Level one is the fundamental
level and is known as the core benefit.
This is the service or benefit the customer is really buying. This is turned into the basic product, which
is the second level. The third level is
where the marketer prepares an expected product, which is a set of attributes
and conditions buyers normally expect when they purchase the product. At the fourth level, the marketer prepares an
augmented product, which exceeds customer expectations. The fifth level is the potential product,
which are all the possible augmentations and transformations the offering might
undergo in the future. This is where
companies search for new ways to satisfy customers and distinguish their offering.
In addition to the product levels, marketers
classify products on the basis of durability, tangibility, and consumer or
industrial use. Durable goods are
tangible goods that survive many uses, require personal selling and service,
command a higher margin and require more seller guarantees. Nondurable goods are tangible goods normally
consumed in one or a few uses. Services
are intangible, inseparable, variable, and perishable products that normally
require more quality control, supplier credibility, and adaptability. Consumer goods are classified according to
shopping habits. They include
convenience goods (purchased frequently, immediately, and with minimal effort),
shopping goods (consumers compare on the basis of suitability, quality, price, and
style), specialty goods (unique characteristics or brand identification), and
unsought goods (consumers do not know about or normally think about
buying). Industrial goods consist of
materials and parts, capital items, and supplies and business services.
Products must be differentiated in order to be
branded. Some products allow little
variation while others are capable of high differentiation. Marketers face an abundance of
differentiation possibilities. Form is
the product’s size shape, or physical structure. Features are characteristics that supplement
a product’s basic function. Mass
customization meets each customer’s requirements, on a mass basis, by
individually designing products, services, programs, and communications. Performance quality is the level at which the
product’s primary characteristics operate.
Conformance quality is the degree to which all produced units are
identical and meet promised specifications.
Durability is a measure of the product’s expected operating life under
natural or stressful conditions.
Reliability is a measure of the probability that a product will not
malfunction or fail within a specified period.
Reparability measures the ease of fixing a product when it malfunctions
or fails. Style describes the product’s
look and feel to the buyer.
Adding valued services and improving its
quality may be the key to competitive success when the physical product cannot
easily be differentiated. Service
differentiators include ordering ease, delivery, installation, customer
training, customer consulting, and maintenance and repair.
Design offers an effective way to differentiate
and position a company’s products and services as competition intensifies. It is the totality of features that affect
how a product looks, feels, and functions to a consumer. It offers functional and visual benefits and
appeals to the rational and emotional sides of consumers.
Products can be related to ensure that a firm
is offering and marketing the optimal set of products. A product system is a group of diverse but
related items that function in a compatible manner. A product mix (or product assortment) is the
set of all products and items a particular seller offers for sale. This consists of various product lines, which
is a group of products within a product class that is closely related because
they perform similar functions, are sold to the same customer groups, and are
marketed through the same channels, or fall within given price ranges. A product mix has width (how many different
product lines the company carries), length (the total number of items in the
mix), depth (how many variants are offered of each product in the line), and
consistency (how closely related the various product lines are in end use,
production requirements, distribution, or some other way). Marketers need to conduct product-line
analysis to provide information for decisions about length and modernization.
A company can lengthen its product line by line
stretching and line filling. Line
stretching is when a company lengthens its product line beyond its current
range. Line filling is when a firm adds
more items within the product line’s present range. In addition, product lines need to be
modernized to encourage customer migration to higher-valued, higher-priced
items. Marketers must also modify their
price-setting logic when the product is part of a product mix. Product-mix pricing is when the firm searches
for a set of prices that maximizes profits on the total mix. Marketers will also combine their products
with products from other companies. One
way is co-branding. This is when two or
more well-known brands are combined into a joint product or marketed together
in some fashion. Advantages of this
include convincingly being positioned by virtue of multiple brands, reducing
the cost of product introduction, and learning about how other companies
approach consumers. Disadvantages
include risks and lack of control in becoming aligned with another brand.
Other important elements of product strategy
include packaging, labeling, warranties, and guarantees. Packaging includes all the activities of
designing and producing the container for a product. It is the buyer’s first encounter with the
product, so it must draw the consumer in and encourage product choice. It must achieve objectives, such as
identifying the brand, convey descriptive and persuasive information,
facilitate product transportation and protection, assist at-home storage, and
aid product consumption. The label
provides an abundant amount of information about a product. It identifies the product or brand, grades
the product, describes the product, and promotes the product. Warranties are formal statements of expected
product performance by the manufacturer, and legally enforceable. Guarantees reduce the buyer’s perceived risk
and suggest that the product is of high quality and the company and its service
performance are dependable.
Companies can add new products through
acquisition or through development from within.
Most new product-activity is devoted to improving existing
products. Reasons for new products
failure include ignored or misinterpreted market research; overestimates of
market size; high development costs; poor design or ineffectual performance;
incorrect positioning, advertising or price; insufficient distribution support
competitors who fight back hard; and inadequate ROI or payback. Established companies often focus on
incremental innovation, which is entering new markets by tweaking products for
new customers, introducing variations on a core product, and creating interim
solutions for industry-wide problems.
Newer companies create disruptive technologies because they are cheaper
and more likely to alter the competitive space.
New product development stages include idea
generation, idea screening, concept development, concept testing, marketing
strategy development, business analysis, product development, market testing,
and commercialization. Idea generation
is the search for ideas. Idea screening
is screening out poor ideas early because product-development costs rise
substantially with each successive development stage. Concept development is an elaborated version
of a product idea expressed in consumer terms.
It is turned into a brand concept.
Concept testing is presenting the product concept to target consumers,
physically or symbolically, and getting their reactions. Once this is successful, the firm drafts a
preliminary three-part strategy for introducing the new product. This forms the basis for the business
analysis. The business analysis is where
the firm evaluates the proposed product’s business attractiveness by preparing
sales, cost, and profit projections to determine whether they satisfy company
objectives. If they do, the concept can
move to the development stage. The
product development stage is where the company determines whether the product
idea can translate into a technically and commercially feasible product. Once management is satisfied with functional
and psychological performance, the product is ready to be branded with a name,
logo, and packaging and go into a market test.
These tests seek to estimate four variables: trial, first repeat, adoption, and purchase
frequency. Commercialization is the
final stage. It is where the firm contracts
for manufacture or builds or rents a manufacturing facility and it also
prepares its communications campaign.
This is the costliest stage in the process. Timing of entering the market is
crucial. If a firm learns that a
competitor is readying a new product, it can choose first entry, parallel
entry, or late entry. However, most
companies will develop a planned market rollout over time.
Adoption is defined as an individual’s decision
to become a regular user of a product and is followed by the consumer-loyalty
process. New product marketers use the
theory of innovation diffusion and consumer adoption to identify early
adopters. Innovation is any good,
service, or idea that someone perceives as new, no matter how long its history. Innovation diffusion process is the spread of
a new idea from its source of invention or creation to its ultimate users or
adopter. The consumer-adoption process
covers the mental stages through which an individual passes from first hearing
about an innovation to final adoption.
These stages are awareness, interest, evaluation, trial, and
adoption.
An innovation’s rate of adoption is influenced
by five characteristics. One is relative
advantage. This is the degree to which
the innovation appears superior to existing products. Next is compatibility, which is the degree to
which the innovation matches the values and experiences of the
individuals. Third is complexity. This is the degree to which the innovation is
difficult to understand or use. Fourth
is divisibility, which is the degree to which the innovation can be tried on a
limited basis. And fifth is
communicability, which is the degree to which the benefits of use are
observable or describable to others.
Cost, risk and uncertainty, scientific credibility, and social approval
can also influence the rate of adoption.
Adoption is also associated with variables in the organization’s
environment, the organization itself, and the administrators.
A product’s life-cycle is divided into four
stages: introduction, growth, maturity,
and decline. The product life-cycle
helps marketers interpret product and market dynamics, conduct planning and
control, and do forecasting.
The introduction stage is where sales grow slowly
as the product is introduced and profits are nonexistent because of heavy
introduction expenses. Sales growth
tends to be slow during the introduction stage because it takes time to roll
out a new product, work out the technical problems, fill dealer pipelines, and
gain consumer acceptance. Profits are
negative or low and promotional expenditures are high. Being the first to enter the market with a
new product can be rewarding, but risky and expensive.
Growth is a period of rapid market acceptance
and substantial profit improvement. The
growth stage is shown by a rapid climb in sales because early adopters like the
product and additional consumers start buying it. During this stage sales rise faster than
costs and promotional expenditures are maintained or increased to meet
competition.
In the maturity stage sales growth slows
because the product has achieved acceptance by most potential buyers, and
profits stabilize or decline because of higher competition. Products reach the maturity stage when the
rate of sales growth slows. Most
products are in this stage the longest.
A brand’s course in maturity can be changed by expanding the market,
improving quality, features, and style of the product, and by modifying
nonproduct marketing elements.
During the declining stage, sales drift
downward and profits erode. Sales
decline for a number of reasons, such as technological advances, shifts in
consumer tastes, and increased competition.
During this stage companies have several options. They can restage or rejuvenate a mature
product by adding value to it; they can harvest the product, which is gradually
reducing its costs while trying to maintain sales; or they can divest, which is
selling the product to another firm.
Example:
Apple is a company who sets themselves apart from all other computer
companies through differentiation, advertising, and customer loyalty. They constantly remain a step ahead of their
competitors by developing new products before their customers get used to the
most current ones they have released.
Their advertising is another strong point that sets them apart from
their competitors. By developing high
quality products their customers have remained loyal. They are constantly upgrading to the newest
product. Apple is able to keep their
prices up because their customers are willing to pay more for better quality.
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